A customer's credit card is accidentally charged twice, and the overcharged
amount is deposited to the seller's bank accounts. The mistake is caught
four days later and reversed. What is the best way to do the accounting for
One of the two charges is correct and is used to pay off an open invoice,
clearing the accounts receivable. Where should the second charge that is in
mistake go? Would it be better to make this deposit an Other Current Asset
or Other Current Liability up until it is cleared by the credit to the
I would create a clearing account if you don't already have one, and
transfer the second charge to that account. That way, you have a balance
sitting in the clearing account until you process the adjustments, which
should go to this same account to clear the balance. All the entries are
then quite visible and reconcilable.
Remove yourhat to reply by e-mail
Setting up another account would just create clutter in your chart of
accounts. I would recommend that you just apply the overpayment to
the customer's account (Dr to cash, Cr to A/R). The credit balance
will show on the customer's account (and statement). This is where it
should show. Your accounting records will reflect the economic
activity that occurred.
When the charge is reversed, then an entry will bring the customer's
account back into balance... (Dr to A/R, Cr to cash).
A final thought... if everything cleared in four days, then besides
maintaining your customer's goodwill, it really won't matter (unless
the timing of the events crosses over fiscal periods)
Just my thoughts...
Russell Tuncap, CMA, CPA
On Mon, 7 Mar 2005 20:28:06 -0800, "Will"
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